Saudi Arabia deposits $5bn in Turkey’s central bank

DUBAI: Saudi Arabia has signed an agreement with Turkey to deposit $5 billion in the country's central bank through the Saudi Fund for Development (SFD), the fund said on Monday.

Saudi Minister of Finance Mohammed Bin Abdullah Al-Jadaan announced his country's intention to make the deposit in December. Ahmed Al Khateeb, the Saudi tourism minister and board chairman of the Saudi Fund for Development, signed an agreement with Turkish central bank governor Sahap Kavcioglu "to make a significant $5 billion deposit", the Saudi government said in a statement. "This deposit is a testament to the close cooperation and historical ties that exist between the Kingdom of Saudi Arabia and the Republic of Turkey and its brotherly people."

The decision, which will shore up Turkey´s foreign reserves and help it combat inflation, was made on the order of King Salman and Crown Prince Mohammed bin Salman, it said. While Turkey's net foreign exchange reserves rebounded from just over $6 billion last summer, when it was at its lowest in at least 20 years, they have lost some $8.5 billion since a massive earthquake hit the country's southern region early in February that killed more than 45,000 people and left millions homeless.

The Turkish central bank's net international reserves fell some $1.4 billion to $20.2 billion in the week to Feb. 24, data from the bank showed on Thursday. Turkey's forex reserves dropped sharply in recent years due to market interventions and in the wake of a currency crisis in December 2021. The lira lost some 30 percent of its value against the dollar last year and 44 percent in 2021.

The move highlights a rapprochement between Riyadh and Ankara after ties suffered a heavy blow with the 2018 killing of Saudi journalist and government critic Jamal Khashoggi in the kingdom´s Istanbul consulate.

Erdogan has pushed hard to revive bilateral ties, a move analysts describe as largely driven by economic considerations. Turkey was already suffering from skyrocketing inflation and a weakening currency before last month´s massive 7.8-magnitude earthquake that rocked huge swathes of the country and parts of Syria.

With elections just a few months away, Erdogan must now absorb economic damage estimated at more than $34 billion by the World Bank.